As a real estate investor, you understand the importance of reducing your tax bill. Working with a real estate tax attorney can help you develop strategies to maximize deductions, minimize taxes on profits, and take advantage of credits available to real estate investors.
Below are some of the strategies real estate tax attorneys use to reduce taxes on your investments.
Making Use of Tax Credits
Tax credits can provide a significant reduction in the amount of tax you owe on investments. Real estate tax attorneys understand the various credit available to real estate investors, such as the historic preservation and rehabilitation tax credit. These credits can provide a dollar-for-dollar reduction in your taxes, so you need to take advantage of them.
To qualify for a tax credit, the lawyer has to be able to prove that you have met certain criteria set out by the government. For example, if you have made improvements or renovations to your property that meet certain energy efficiency standards, you may be eligible for an energy-efficient tax credit. Your attorney then has to supply documentation that proves this investment meets these standards.
Other types of tax credits depend on where the investment property is located and what types of investments were made in it. A real estate tax attorney can help determine which credits are available in a particular locality and which ones might offer the greatest benefit for a given situation.
You can take advantage of these opportunities and significantly reduce the taxes owed on any given investment, allowing you to make even larger profits from your properties going forward.
Utilizing Expense Deductions
Real estate tax attorneys can also use certain expense deductions to help reduce taxes on their client's investments. These deductions are meant to reduce the taxable income for investment property by accounting for any money spent as part of that investment. Some typical items that can be deducted include loan points, legal and professional fees, interest expenses, and insurance costs.
When filing for these expense deductions, your lawyer should have all the relevant documentation in place before submitting their return. This includes receipts from the expenses incurred and statements from accounts showing when payments were made and how much they amounted to. The attorney should also be able to prove that the expenses were legitimate business expenses, not personal ones.
If done properly, expense deductions can significantly reduce tax liability on an investment property. Your lawyer can carefully track all related costs and document every deduction properly to ensure you benefit from the full amount possible when it comes time to file returns with the IRS.
